Understand IRR and NPV

Author(s): Andy Woyzbun

The business side of the organization generally uses one of two financial metrics to determine the viability and, therefore, the attractiveness of an investment: Net Present Value (NPV) and Internal Rate of Return (IRR). IT Managers making proposals that generate benefits and costs over several years must understand these metrics, how they are calculated, and how to use them to build a business case to frame IT spend favorably to business stakeholders.